OC REALTORS® Blog

OCAR 2017 President, Craig Borner is pleased to announce the election results of the 2018 Officer positions of President-Elect and Treasurer held at the June 28, 2017, Orange County Association of REALTORS®’ Board of Directors meeting.

Board member Matt Clements will serve as President-Elect in 2018, President in 2019 and Immediate Past President in 2020 and Adam Rodell will serve a one-year term as Treasurer in 2018. Adam currently serves as the 2017 Treasurer.

“My congratulations to Matt who has served on the Board of Directors since 2015, and Adam who will be serving his second term as Treasurer in 2018. Both of these gentlemen bring a wealth of knowledge and experience to the Association,” said Craig.

“Our Board of Directors demonstrates aptitude, experience and the commitment to provide strong leadership; It is gratifying that Matt and Adam took my encouragement to run for these positions, and I look forward to the opportunity of continuing to work with them in the coming year.”

Matt Clements: Matt has been a REALTOR® since 2004 and is a proud 4th generation real estate agent. He is CEO, The Clements Group, Berkshire Hathaway HomeServices California Properties, Laguna Niguel.

Adam Roddell: Adam has been a REALTOR® since 1998, and he is an agent with RE/MAX Select One in Huntington Beach.

This issue of OC REALTOR® kicks off summer with What's New within the industry including the announcement of our newly elected Directors, the launch of our Broker Licensing program and our Shop Local Discount Program plus much more! Read and share some of the featured articles in this month's issue.

All ActiveKEY users must switch to eKEY service in order to still access Supra lock boxes. This means that you will no longer be able to access lock boxes and you will incur fees. All ActiveKEYs are leased, therefore, you are responsible for the annual lease payment until they key is returned. Otherwise, you may pay the liquidated damages on the key.

You have the following options:

Returnthe ActiveKEY and sign upfor the eKEY monthly service for only $14.78/month (the $50 activation fee will be waived)

Return the ActiveKEY andcancelSupraservice until needed ($50 activation will apply when activating Supra service in the future)

Mail your ActiveKEY to us (please make sure you get a proof of delivery) and advise us by email of your intention to cancel your Supra service.

What you need to know about the transition:

• All ActiveKEYs will be shut off on September 18

• If you have an ActiveKEY, you must return or exchange it. Otherwise you will incur fees.

• You must have a smartphone or tablet in order to use the eKEY service

Lower the business tax rate from one of the highest in the world to one of the lowest.

Those in the real estate industry who are concerned about possible elimination of the mortgage interest deduction will not find much reassurance in Trump’s brief proposal. It makes only causal mention of these incentives with the words, “Protect the home ownership and charitable gift tax deductions.” Your guess as to what that means is as good as mine.

But more important than focusing on the specific provisions of any proposal is understanding why government policy should incentivize home ownership. As an engaged industry, our purpose is not to obstruct but, instead, to support at all levels of government programs and policies that encourage home ownership and protect real property rights.

There are enough theories about tax reform to keep Congress busy from now on. More important than theories, however, is the proven way in which tax incentives have worked to encourage home ownership and, thereby, to create and preserve the American Dream.

The United States was once a renter society, ruled by aristocratic landowners. Fortunately, unlike any other period in history or any other place on earth, those landowners unselfishly built the lasting mechanisms of liberty and willingly spread the wealth of landowning.

It is difficult for even the staunchest limited-government advocate to deny the correlation between government’s involvement in housing and the increase in home ownership. In the past century, home ownership was responsible for the largest redistribution of wealth in American history. It is the easiest way to move up the economic ladder, and it is the best way for those who have not inherited wealth to build it.

The mortgage interest deduction and other tax incentives are part of a bigger picture. On a national scale, this picture includes not only tax incentives but also the government-sponsored enterprises like Fannie Mae and Freddie Mac and their work in the mortgage market. Locally, home ownership can be discouraged by factors like restrictive zoning and government-imposed building costs and fees.

Whatever the issue, however, our messaging needs to be focused on what’s important to our industry and our clients. For us REALTORS®, this discussion is not theoretical and impersonal but emotional and personal because it affects where we live and how we work. Any decision about the “business” of buying, selling, and taxing homes is personal for us. And it is personal for our clients. Emotions cannot be ignored when the decision being made affects the largest purchase of their lives.

The facts and figures are important, and I would encourage you to educate yourself about the effect of the home ownership incentives in the tax code. But political discourse often devolves into surface-level talking points that neither express feelings adequately nor result in a more meaningful dialog about the facts at hand.

Remember, this time, it’s personal. Don’t just tell lawmakers what you want them to do; tell them why it matters. We cannot let them forget that we are fighting to preserve the American Dream. That message will stick with them long after the numbers have changed and the reasons for those numbers have been forgotten.

As a husband and father, I am thankful that my family has a roof over its head and a solid foundation for economic success. More important than either economic theories or talking points is the proven way in which tax incentives have worked in the real world to encourage home ownership and, thereby, to create and preserve the American Dream.

Disclaimer: The content in this Government Affairs column is intended as a general advisory and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors; therefore, readers with specific legal questions should seek the advice of an attorney.

Barbara Reily Dostal grew up in the Los Angeles area, where she graduated from Immaculate Heart High School in Hollywood as a member of the class of 1948. After earning a degree from Woodbury University in Burbank, she became a teacher at St. John the Baptist in Costa Mesa. Perhaps because Barbara welcomed the opportunity to meet people, she entered real estate; and for nearly thirty years, she was a REALTOR® in the Irvine area.

When Barbara was not selling homes, she enjoyed helping youngsters in need throughout Orange County. Her talents were welcomed at Orangewood Children and Family Center in Orange, at the Lighthouse Learning Center in Santa Ana, and elsewhere. In addition to volunteering, Barbara filled her spare time by traveling, raising orchids, and painting with water colors.

Barbara is survived by two sons, Kevin Michael Reily and Sean Patrick Reily; two daughters, Coleen Patricia Reily and Kathleen Reily-Dixon; and three grandchildren—with whom she shared her love of life.

At 11:00 a.m. on Saturday, June 17, family members and friends will gather at the Woodbridge Village Association Clubhouse, 31 Creek Road, Irvine, for a service to remember Barbara and to celebrate her life well lived. Lunch will be served following the service. For those who may not be familiar with the clubhouse, parking is available behind the building.

“We are proud to acknowledge the graduates of our first Leadership Academy," stated Craig Borner, 2017 President of OCAR. "They have completed the eight-month program and a legislative visit to the State Capitol. Some have already accepted leadership roles within OCAR, and many are looking to embrace future leadership opportunities with OCAR and the community. We are delighted that graduates Dorinda Francois and Danielle Corliss were recently elected to serve on the OCAR 2018 Board of Directors.”

Dave Stefanides, OCAR CEO is delighted with the caliber of the graduates and is hopeful that many of them will give back and mentor future Leadership Academy participants.

The instructor-led training programs are conducted monthly. The 2017-2018 Leadership Academy is now accepting applications and the deadline to apply is July 28, 2017 by 5:00 p.m. For more information visit www.ocar.org/leadership-academy.

In celebration of June being National Home Ownership Month, the OC REALTOR® focused on the current housing market, benefits of home ownership and the role REALTORS® play in the American Dream. Read and share some of the featured articles in this month's issue.

Orange County REALTORS® is excited to announce two new FREE member benefits available through CRMLS.

FHAPros is a new FHA eligibility status report within the Matrix system. All OCR members will now be able to see the FHA eligibility for the condominiums listed for sale within CRMLS.

You can find the new stoplight icon on the grid view when you search for properties. There will also be a link on the property detail report. Clicking on the icon or link will open the FHA eligibility report indicating the unit’s status and provide information about getting an association approved for FHA financing, if desired.

This new feature amps up the already powerful RatePlug Program which allows for the display of real-time housing payment information within MLS property listings to help Real Estate Agents and homebuyers effectively search for affordable properties. The system uses live lending data from lenders who are referred by and work with the participating REALTOR®. The program provides reliable financing information to homebuyers at the very beginning of the real estate buying process so that sound, knowledgeable decisions are made about housing affordability and financing, which in turn, helps agents sell homes faster.

Local Government Relations Committee North and South (Open committee participation, only members can participate in executive session and vote) – These are our primary policy committees. Here you will review local, state, and federal legislative actions, and recommend policy positions to the OCR Board of Directors. The committees often receive updates from local elected officials and community partners. Meets monthly (10 times per year).

Political Affairs and Elections Committee (PAEC)(Closed to committee members only) - Handles political and election activities on behalf of the OCAR Board of Directors. Makes recommendations to support or oppose candidates for election to city, county, and state offices. Makes recommendations to support or oppose ballot measure and other issue-related campaigns. Conducts fundraising activities for the REALTOR® Action Fund (RAF). Meets monthly (10 times per year).

Community involvement

Join city commissions and committees – Much like our OCR committees, city commissions and committees are tasked with making recommendations to the city council. Some, like the planning commission, has decision making authority of their own. Committees and commissions are a great way to move up the political ladder in your city, and any resident can apply. Members are, however, selected by council members, so it helps to first attend local events and meeting and get to know you council members.

Participate in local non-profits - Many of the same people that participate in local government, are active in local non-profits. It’s another great way to get your foot in the door, and work for a great cause!

Grassroots

Speak at council meetings – When certain issues appear on a council agenda, OCR often needs speakers. Volunteering to speak is a great way to get known, and advocate for homeowners.

Respond to C.A.R. Red Alerts – Red Alerts are an easy and effective way to speak as one voice to our elected representatives. Text REALTORS to 30644 to sign-up

Educate yourself – Being an educated community advocate is a great way to build trust with your clients. Sign-up for government affairs emails (sent only once a week), at www.ocar.org/ga.

Anita Yegsigian passed away of natural causes at her home in Palm Desert on March 18, 2017. Before moving to the desert thirteen years ago, she had lived for forty years in Mission Viejo, where she was active in real estate. The owner of All Star Realty in Mission Viejo, she was named Top REALTOR® in Sales for the Saddleback Valley in 1976.

By all reports, Anita’s cooking also took top honors. Friends and family members recall that she was always preparing her favorite Armenian dishes for a gathering of one sort or another. More recently, she was active in the women’s guild of St. Garabed Armenian Apostolic Church of the Desert in Rancho Mirage, where she had been affectionately dubbed “the pilaf queen.”

In her later years, Anita enjoyed the peace and serenity of desert living and, until recently, spent at least two days a week on the golf course. Anita’s family members suggest that friends who wish to honor Anita’s memory send donations in her name to St. Garabed Armenian Church, 38900 Vista Dunes Road, Rancho Mirage 92270.

The strong connection between housing policy and housing availability is one reason that REALTORS need to take the lead on this issue.

By Tony CapitelliGOVERNMENT AFFAIRS DIRECTOR

I often speak of the nexus between public policies that affect real estate practitioners and those that affect everyone else. Perhaps, there is no better example of this nexus than our current affordable housing crisis. While REALTORS® have trouble finding listings, other people have trouble finding homes. The strength of this connection is the reason that REALTORS® need to take the lead on this issue.

We often hear the phrase “disposable income”; however, this “income” is about as “disposable” as a soldier’s water canteen. It is our lifeblood when we face times of crisis and enables us to absorb what life throws at us. But this term is no longer in the vocabulary of many Orange County residents because housing costs consume so much of their income. According to the California Association of REALTORS®, only 22 percent of Orange County’s population can afford to purchase a median-priced home. To qualify, a household would need to make $92,571 a year, and this does not include saving for a down payment.

I am sure you can think of someone who has been affected by this crisis—perhaps you, yourself. Are you a young adult trying to find your path in life? Do you have a young family and need space for your kids? Are you recently divorced and needing to find a new place to live? Are you paying for your children’s college tuition? If you are married and in your twilight years, you’re probably okay; but at this rate, you’ll soon be part of the only group left to enjoy home ownership in this beautiful county.

The good news is that there are solutions. The question is whether we can come to grips with those solutions before we lose an entire generation of home owners.

So, what are those solutions?

More Housing

Ultimately, this crisis is a matter of supply and demand. California is running short about 65,000 housing units a year. During 2016, Orange County added 162,740 new jobs but built only 44,923 new housing units. This kind of deficit leads inevitably to higher prices. If the Orange County housing market cannot accommodate growth, neither can the Orange County economy. Higher density is difficult for communities to embrace; but with a little creativity, it can actually improve local quality of life.

Less Regulation

According to the California Legislative Analyst’s Office, because of labor costs, construction costs, environmental regulations, and local development fees, it is $50,000 to $70,000 more expensive to build a home in California than it is to build elsewhere in the country. These higher costs are passed directly from home builders to home buyers and from landlords to renters.

More Entry-Level Ownership Options

While we are still far behind the necessary pace of development, we are all witness to the recent development boom. Unfortunately, most of the new housing units being built are either rental apartments or expensive single-family homes. For many, including me, townhomes and condos are the only avenues into the housing market. Cities need to work with developers to encourage construction of more of these entry-level ownership options. If they don’t, younger renters will not stay.

Better Transit

If home owners are to absorb higher housing costs, they need to save money elsewhere. Average car loan payments are about $506 a month, and this figure does not include insurance, maintenance, and fuel. Home buyers are looking to live closer to work and cut down on long commutes. Light rail, automated vehicles, and the location of housing—all need to be in the minds of policy makers.

Low-Level Assistance Programs

Homelessness isn’t limited to the chronically homeless. This category also includes families on the verge of being evicted or living in temporary housing. Assistance programs like rapid re-housing are effective in providing a necessary safety net.

Down payment assistance is often essential for first-time home buyers. Without it, the U.S. homeownership rate might look more like that of Germany, where the rate is around 50 percent. And the negative connotation of FHA loans needs to be corrected. As it is, only 10 percent of townhome and condo communities are willing to accept these loans.

As a REALTOR®, you are in a unique position because the future of your community affects both your home and your livelihood. I encourage you to embrace that role and become a community advocate. Help influence your local policy makers regarding the importance of making housing more available, more accessible, and more affordable.

Esther Mae (Sherman) Goff was born in Los Angeles, on March 6, 1938, but later moved with her family to Temple City, California. In 1968, while living in Berea, Kentucky, she helped stage health fairs for the Council of the Southern Mountains, a nonprofit organization concerned with education and community development in southern Appalachia. This experience inspired Esther to become a nurse.

Later, Esther turned from health care to real estate, becoming a salesperson in 1978 and a broker in 1982. For many years, she served as a director of the Saddleback Valley Board of REALTORS®, a predecessor organization of the Orange County REALTORS®, and as a director for the California Association of REALTORS®. Well respected among her colleagues in the real estate industry, Esther was elected president of Saddleback Valley Board of REALTORS® in 1991 and then honored as REALTOR® of the Year in 1993.

Early on the morning of Tuesday, February 28, 2017, Esther Goff lost her battle with breast cancer. Those who knew her well will remember her as a caring person who always found meaningful ways to make a difference. She and Joe, her husband of sixty years, were residents of Forest Gardens in Lake Forest, where family members and friends will gather to celebrate Esther’s life in the clubhouse on Saturday, April 8, from 1:00 to 4:00 p.m.

Familiarity with these ten factors will help you answer your clients’ questions about the real estate market and where real estate values may be headed.

By David GirlingGirling Real Estate Investment Group

The first article titled “Dave’s Top 10 Economic Factors Realtors® Should Be Following Today” appeared on pages 38–45 in the May/June 2016 issue of OC Realtor. Much has transpired since that article was published. We have a new President, the Federal Reserve has raised interest rates, the Dow Jones Industrial Average is at an all-time high, but housing inventories are still constrained.

Headlines convey different messages about real estate. Some are optimistic while others are pessimistic and still others fall somewhere in between. It is important that we, as REALTORS®, be able to read past the headlines and make sense of the news for our clients. The goal of Dave’s Top 10 is to give you some tools to answer the questions your clients may be inspired to ask by the news stories they read.

10. The Trump Effect

Since the election, mortgage rates have climbed anywhere from 0.50 to 0.625 percent, and I think we can expect this trend to continue. President Trump’s policies on trade, infrastructure, tax rates, and immigration will lead to bigger deficits and higher inflation, which translates to higher interest rates. The Federal Reserve is signaling that it will raise the Fed Funds rate in 2017. And the administration has made statements that it will attempt to dismantle many of the regulatory safeguards (e.g., Dodd-Frank) that have been put in place since the 2007 recession.

In addition, Ben Carson, the new secretary of the Department of Housing and Urban Development (HUD), has indicated that he is in favor of privatizing the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), which may affect loan liquidity and the availability of thirty-year fixed-rate loans. The reversal of the Obama administration’s reduction of the mortgage insurance premium also put a damper on optimism that previous policies had been created. All in all, the news thus far has created a great deal of uncertainty about the ultimate effect that the Trump presidency will have on housing.

9. Interest Rates

For the past three or four years, mortgage rates have been at historic lows because the Federal Reserve has employed a monetary policy that has kept rates low (see Figure 1). Since the presidential election, rates have climbed, but they are still near historic lows. The impact of these low rates may be positive in the short term. Home sales may increase because buyers want to take advantage of today’s lower rates before mortgage rates climb higher.

Figure 1. For the past three or four years, the Federal Reserve’s monetary policy has kept mortgage interest rates at historic lows; however, rates have been increased since the presidential election.

One effect of increasing mortgage rates is a loss of purchasing power. The rule of thumb is that a 1 percent change in rates equals a 10 percent loss or gain in purchasing power. As REALTORS®, we should be able to convey to our clients exactly how this may impact them financially. Figure 2 shows how a 1 percent increase in interest rate affects the actual cost of a $745,000 home. Assuming a borrower cannot afford a higher mortgage payment, the buyer loses $82,444 of purchasing power if the rate increases from 4 to 5 percent. This sort of information supplied to clients might be all that is needed to turn a renter into a buyer.

Figure 2. Assuming the would-be purchaser of a $745,000 median-priced home can afford to make a monthly payment of no more than $2,845, a 1 percent increase in interest rate from 4 percent to 5 percent would equate to a loss of $82,444 in purchasing power, or the ability to afford a home priced no higher than $662,556, rather than $745.000 originally contemplated.

8. Housing Inventories

Low housing inventories have added support to home values, and I believe that inventory levels will not improve significantly for the reasons listed below.

Some homeowners still have negative equity and cannot sell.

The property taxes may be higher for someone selling one property and buying another or simply downsizing.

Capital gains taxes could be significant.

Some homeowners may be reluctant to give up their current low mortgage rates.

New construction is not meeting demand, and homebuilders are underperforming.

Some homeowners are afraid that they will not be able to find an adequate replacement because of low supply and/or high rents.

Some homeowners are still affected by the 2007 crisis and are unwilling to sell.

Many single-family homes that might be listing candidates are now part of the rental pool because so many were purchased by investors during the past few years.

I have been compiling this list since it became clear that inventory levels were becoming a key driver of real estate values and activity. Low supplies and high demand will continue to support home prices for the foreseeable future.

7. Housing Affordability

Lawrence Yun, the chief economist for the National Association of REALTORS® (NAR), states that “we have a mismatch with home values rising too fast in relation to incomes” and that “wages really need to come back alive to sustain the housing market recovery.” Affordability is certainly one factor about which most economists are concerned. According to the California Association of REALTORS® (C.A.R.) Housing Affordability Index (HAI), the percentage of home buyers who could afford to purchase a median-priced, existing, single-family home in California as of the third quarter of 2016 was 31 percent. That number was even lower for Orange County at 23 percent.

Figure 3. Housing affordability is one factor about which economists are concerned. According to the C.A.R. Housing Affordability Index for the third quarter of 2016, the percentage of home buyers who could afford to purchase a median-priced, existing, single-family home in California was 31 percent. For Orange County, the number was 23 percent.

The Housing Affordability Index peaked at 56 percent at the beginning of 2012 and has dropped steadily since. In February 2009, when home prices started to appreciate, the median price for a home in California doubled and the median price for a home in Orange County rose over 60 percent. Ironically, higher interest rates reduced affordability levels before the mortgage “meltdown”; however, affordability was not an issue because low teaser rates, no money down, and negative amortization loans made credit easy to obtain.

6. U.S. Homeownership Rate

According to the Wall Street Journal (February 3, 2017), “The U.S. homeownership rate fell in the fourth quarter, frustrating the efforts of policy makers trying to embolden more Americans to buy their own homes as the economy strengthens.” This is a great example of why it is important to read past the headlines. While the rate did fall year over year, it actually rose over the past two quarters (see Figure 4).

Either way, this is an opportunity for REALTORS® because many of the homeowners who became renters during the housing crisis will become homeowners again. Across the United States, the homeownership rate currently stands at 63.7 percent. This rate peaked at 69.2 percent in 2004 and reached its lowest level of 62.9 percent in the second quarter of 2016. Sadly, California ranks forty-ninth in homeownership according to C.A.R.

Figure 4. Although the U.S. homeownership rate fell in the fourth quarter, it actually rose over the past two quarters. Across the United States, the homeownership rate, which peaked at 69.2 percent in 2004 and reached its lowest level of 62.9 percent in the second quarter of 2016, currently stands at 63.7 percent.

5. Dow Jones Industrial Average

The low rates created by the Fed’s monetary policy forced investors to look elsewhere for yield, and both real estate and stocks benefitted. However, the increase in rates since the election may cause investors to look more closely at fixed-income investments as an alternative. This may have an impact on real estate values going forward.

While real estate prices have leveled off, the Dow Jones Industrial Average continues to soar and has surpassed 20,000. Unlike stock prices however, not all home price levels have reached 2007 peak levels (see Figure 5). And some analysts suggest that both real estate values and equity prices may be overinflated. REALTORS® should continue to monitor the relationship between the stock market and real estate prices.

Figure 5. REALTORS® need to monitor the relationship between the Dow Jones Industrial Average and local real estate values, as measured by the Orange County median home price. Data show what has happened to these numbers from late 2008, when the Federal Reserve began its quantitative easing program, until December 31, 2016.

4. Foreign Investment

While the housing market has been fueled primarily by low interest rates and foreign investment during the past few years, the strong dollar has caused foreign investment to pause because U.S. real estate is now viewed as being more expensive. The Chinese, who have overtaken the Canadians as the number one investors in U.S. real estate, are an exception because they view the United States as a safe haven and continue to invest at a steady pace, despite the strong dollar. Foreign investment is important for the continued strength of the real estate market because it supports prices. In NAR’s Profile of International Activity in US Residential Real Estate, the following are highlights for the period from April 2015 through March of 2016:

The top five countries to invest in U.S. residential real estate accounting for 51.3 percent of total volume were China (26.7 percent), Canada (8.7 percent), India (6.0 percent), the UK (5.3 percent), and Mexico (4.6 percent).

Some 1.7 percent of existing home sales went to foreign buyers (214,900), while 8 percent (102.6B) of total volume was attributed to foreign buyers.

The average price for a home purchased by a foreign buyer was $477,000 versus $267,000 for the average home purchased by a U.S. buyer.

Florida, California, Texas, Arizona, and New York accounted for 51 percent of the total volume by foreign buyers

3. Home Prices (includes fourth quarter results for the Orange County Home Price Index)

Price appreciation for the California and Orange County median home as measured by the year-over-year change for each month has leveled off during the past few years. Since 2014, the rate has remained in the range of approximately 3 to 6 percent (see Figure 6). Supporting these numbers, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index shows that prices increased 5.6 percent annually in November. The index maintained by the Federal Housing Finance Agency saw home prices rise 6.1 percent in November. And this trend is projected to continue into 2017.

Figure 6. Price appreciation for the California and the Orange County median home as measured by the year-over-year change for each month has leveled off during the past few years and has remained in the range of approximately 3 to 6 percent since 2014.

According to C.A.R., the December median prices for California and Orange County (see Figure 7) were as follows:

California: $509,060 (up 4 percent year over year)

Orange County: $745,000 (up 4.8 percent year over year)

Figure 7. According to C.A.R., the Orange County median home price was $745,000 in Decmeber, up 4.7 percent from the previous year.

The Orange County Home Price Index (OCHPI), which was first introduced on pages 50–51 in the July/August 2016 issue of the OC Realtor, enables REALTORS® to look at the relative values in a given area, such as Orange County. In the fourth quarter of 2016, the OCHPI resulted in an index value of $699,000 for a standard home (i.e., a single-family detached home measuring between 1,800 and 2,200 square feet and containing three bedrooms and two baths) in Orange County (see Figure 8).

Figure 8. In the fourth quarter of 2016, the OCHPI resulted in an index value of $699,000 for a standard home in Orange County.

As a reminder, the OCHPI includes median prices for standard homes sold since January 1, 2006, in the following ten select Orange County cities: Anaheim, Costa Mesa, Fullerton, Huntington Beach, Irvine, Mission Viejo, Newport Beach, Orange, Santa Ana, and Tustin. Figure 9 may help REALTORS® use this index to compare relative home values in individual neighborhoods with the median prices in these Orange County cities.

Figure 9. In the fourth quarter of 2016, the OCHPI resulted in an index value of $699,000 for a “standard” (single-family detached, three-bedroom, two-bath, 1,800 to 2,200-square-foot) home in Orange County (see Figure 8). This table shows how Orange County Home Price Index values for each of the ten select cities compare with this OCHPI value.

2. 2007 Peak versus 2017

Low interest rates, reduced inventory levels, foreign investment, and an improving economy have all contributed to a strong housing market over the past few years. As a result, prices in some areas of California are approaching peak levels and, in other areas, have surpassed peak levels. For December, the California median home price was 14.4 percent below peak levels, while the Orange County median home price was 3.9 percent from its peak level. The OCHPI was 8.2 percent from its peak level.

It is instructive to compare real estate prices today with the price levels at the peak in 2007. Because it is also helpful to compare the levels for other economic factors today with their peak levels, I created the chart shown in Figure 10. Other than home prices, the factors I found especially interesting were the following:

Interest rates. As stated before, foreign investment along with low interest rates fueled the housing recovery. Imagine where the recovery would be if rates were still around 6 percent, as they were in 2007.

Housing affordability. In 2007, affordability was even lower than it is today, but the easy credit conditions (low teaser rates, no money down, negative amortization loans) in 2007 offset the implications of the low affordability.

National debt. The most ominous of these factors continues to be the level of national debt, which has increased from $9.2 trillion to just under $20 trillion.

Figure 10. It may be instructive to compare the levels of several measures of economic activity in January 2007 with the levels of these same measures ten years later, in January 2017. Perhaps most interesting in this comparison are the numbers given for interest rates, housing affordability, oil and gasoline prices, and the national debt.

And the Number One economic factor (a repeat from the previous Top 10) REALTORS® should be following today is—

1. Is There a Real Estate Bubble?

The preceding nine factors will be used to address this question; however, with all of the safeguards that have been put in place since the mortgage meltdown, it is my opinion that we will not experience anything like that again. I believe the more appropriate question is the following: How much will prices and sales volume correct in this environment?

Below is a summary of how I might expect some of the previous nine factors to affect real estate values and activity.

The effect of a Trump presidency on the real estate market is uncertain and will require REALTORS® to closely follow developments over the course of the next few months.

When interest rates go up significantly, there will be an impact on real estate values; however, we may see some increased volume in the short term from people who are trying to take advantage of the current interest rates before they go up even further.

Housingaffordability is a major concern, and it will be addressed through easier credit conditions (e.g., lower down payments), lower prices, and higher wages or some combination of all three factors.

As prices approach peak levels, some may suggest that we are approaching a level where buyers may want to step back and assess.

Despite the strong dollar, foreign investment will continue to support prices, especially through Chinese purchasers who view the US as a safe haven.

For the reasons outlined previously, housing inventory levels will remain low, and as a result, prices will be supported.

As long as buying is still seen as a viable alternative to renting, prices will remain strong.

The homeownership rate has declined; however, renters who once were homeowners may come back into the market as buyers, and millennials may choose to become first-time buyers, providing additional support for home prices.

In summary, these are ten factors that REALTORS® need to monitor today. Many of these factors will continue to support real estate values and buying activity. Share this knowledge with your clients. They will appreciate you for it.

David Girling completed his undergraduate work at the University of Southern California and earned the degree of Master of Business Administration from the Anderson Graduate School of Management at the University of California, Los Angeles. In 2008, he formed Girling Real Estate Investment Group (Girling REIG) with his father, Bing, and has more than thirty years of experience in the financial services industry.

When a property built on or before January 1, 1994 is undergoing additions, alterations, or improvements; SB 407 requires non-compliant plumbing fixtures to be replaced with water conserving fixtures. Also, property built before 1994 that is altered or improved after 2014, must install compliant water fixtures as a condition of final permit approval.

Current Disclosure Requirement

As of January 1, 2017, the seller or transferor of single family units must disclose to a purchaser, in writing, requirements for replacing plumbing fixtures. In addition, the seller must disclose whether the real property includes noncompliant plumbing fixtures. The start date of this requirement for multifamily units is January 1, 2019.

First, the TDS will allow the seller to disclose to the buyer the legal requirements of the law. That's on the second page of the TDS in the fine print.

Secondly, with the 2016 December forms release, the Seller Property Questionnaire (Form SPQ) will be revised to ask the seller whether they are aware of any non-compliant plumbing fixtures.

Thirdly, on those transactions which are TDS exempt, the Exempt Seller Disclosure (Form ESD) will be amended to facilitate both disclosures. (Since for TDS exempt properties, neither the TDS nor the SPQ is used).

Finally, with the December forms release there will be an optional disclosure form for "Water conserving Plumbing Fixtures and Carbon Monoxide Detector Notice" (Form WCMD). This form will provide an explanation of the technical requirements of the law. It is not actually a new form, but instead, is a revision of the existing "Carbon Monoxide Detector" form. Although, it is an optional form, agents should check with their broker to see if the brokerage requires its delivery.

Plumbing Fixtures Considered Noncompliant:

Toilets that use more than 1.6 gallons of water per flush (gpf).

Urinals that uses more than 1 gpf.

Showerheads that have a flow capacity of more than 2.5 gallons of water per minute (gpm).

Interior faucets that emits more than 2.2 gpm.

The maximum gpf or gpm on a particular water fixture is typically determined by the year it was manufactured. For instance, toilets manufactured between 1980 and 1992 usually use 3.5 gpf. In 1994 the federal government mandated that manufactured toilets use an average of 1.6 gpf or less. These standards and dates very by water fixture.

Here is how to determine the gpf or gpm for each type of fixture.

On toilets, the gpf is often listed next to the hinges or inside the tank. If not, look for the amount of liters, or year manufactured. 6 gpf is 6.1 liters.

On showerheads, the gpm is usually listed in VERY small print near the rim, where the shower head attaches to the water supply.

On faucets, the gpm is also usually listed near the rim next to the aerator.

There are manual methods to determine the flow or flush rates for each fixture. If you cannot find the gpf or gpm, please contact me at tonyc@ocar.org, and I can send you more information.

According to the California Energy Commission’s Appliance Efficiency Regulations here are the requirements for water fixtures manufactured after January 1, 2016. Retailers, however, are permitted to sell products purchased prior to that date.

Single flush toilets, 1.28 gpf.

Dual flush toilets, composite average 1.28 gpf

Wall mounted urinals, 0.125 gpf.

Other urinals, 0.5 gpf.

Showerheads, 2 gpm at 80psi.

Bathroom faucets: 1.5 gpm

Kitchen faucets: 1.8 gpm

If you have any questions, again please contact me at tonyc@ocar.org. Thank you.

Disclaimer – This update is intended as a general advisory, and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.

We were saddened to learn in early January that long-time REALTOR® Pat Paulk had passed away. Pat was well respected by her colleagues in the real estate industry, who—in 1993—elected her president of the Huntington Beach/Fountain Valley Board of REALTORS®, a predecessor organization of the Orange County REALTORS®. She served as a Director of the California Association of REALTORS® and was honored by the Huntington Beach/Fountain Valley Board of REALTORS® as its 1995 REALTOR® of the Year. Pat and her husband Jim, who were once active members of the Huntington Harbour Anglers Club, had been living in Georgia for some time before her passing.

Property Assessed Clean Energy (PACE) programs are one way to finance energy-efficient home improvements. Unlike other available energy improvement programs, however, PACE financing attaches to the property in the form of a tax. Because this kind of financing involves a property tax, the companies administering the program need a city’s or a county’s tax-levying authority to market it to residents. For this reason, PACE is available only where the city council or the county board of supervisors has granted this authority.

What problems are associated with PACE?

Predatory Lending: Qualification is based on home equity rather than on the borrower’s ability to repay, which violates the U.S. Department of the Treasury’s prohibition against predatory lending practices.

Structured as a Property Tax Assessment: Because the amount borrowed is structured as a property tax assessment, it attaches to the property itself rather than to the owner, which negatively affects the owner’s ability either to sell the property or to refinance it and restricts a potential buyer’s ability to qualify for a mortgage on the property.

“Super-Priority” Lien: The amount borrowed is structured as a “super-priority” lien on the property, which means that, in the event of default, the PACE loan takes repayment priority over even the first mortgage. This arrangement violates the conditions spelled out in most mortgage agreements, negatively affects the owner’s ability either to sell the property or to refinance it, and restricts a buyer’s ability to qualify for a new mortgage on the property.

No Proof of Benefit or Value: Because the energy-efficient home improvements financed with PACE programs are often sold without either a home energy audit or a third-party certification of their operational effectiveness, the homeowner has no basis for performing a cost-benefit analysis or for assessing the true value of the improvements.

No Utility Cost Offset: The homeowner is told that he or she will save enough on utility bills to cover the cost of the energy-efficient upgrades, but this utility cost offset seldom materializes. More often, the hapless homeowner ends up deep in the red.

No Financial Oversight: Most of the contractors pitching PACE financing options have no financial expertise, and their offers and promises are not currently being scrutinized by any financial institution or government agency.

High Interest Rates: The interest charged for PACE financing can be as much as twice the amount charged for a home equity loan or on loans obtained via other financing alternatives.

Large Payoff Penalties: The penalties for early payoff are large and may include extended interest payments.

Harsh Late-Payment Penalties: Late payment or failure to pay is penalized in the same way as failure to pay property taxes and could result in foreclosure.

Automatic Default: A homeowner whose mortgage agreement specifically prohibits any other loan or lien from taking priority over the first mortgage—and most do—will be automatically in default. Thus, the lending institution holding the first mortgage can require accelerated payment or initiate foreclosure.

The California Civil Code defines an “associate licensee” as “a person who is licensed as a real estate broker or salesperson … and who is either licensed under a broker or has entered into a written contract with a broker to act as the broker’s agent in connection with acts requiring a real estate license and to function under the broker’s supervision in the capacity of an associate licensee.”

While dual agency is treated differently in different states, this practice is legal in California provided that it is properly disclosed and consented to. Horiike v. Coldwell Banker et al. was a dual agency case involving luxury property in Malibu.

Chris Cortazzo, from Coldwell Banker’s office in Malibu, was the listing agent for the property. Both on the Multiple Listing Service and in a marketing flyer, Cortazzo described the property as having approximately 15,000 square feet of living areas. The buyer, Hiroshi Horiike, who purchased the property for $12.25 million, was represented by Chizuko Namba, an agent from the Coldwell Banker office in Beverly Hills.

The public record obtained by Cortazzo from the tax assessor’s office states that the property’s living area is 9,434 square feet, and the building permit obtained by Cortazzo states that the property is 9,224 square feet. Horiike signed all of California’s required dual agency disclosures; and through Namba, Cortazzo presented Horiike with a copy of the residence’s building permit and with an advisory form stating that only an appraiser can verify square footage and that a broker does not have that expertise.

While the court in Horiike does not go so far as to impose complete liability on associate licensees in a dual agency situation, it does define a fiduciary duty of disclosure. Here is what you need to know:

An associate licensee in a dual agency situation now has “a duty to learn and disclose all facts materially affecting the value or desirability of the property” in question.

An associate licensee still has loyalty to his or her client. The disclosure requirement includes “facts materially affecting the value or desirability of a property that are not known to or reasonably discoverable by the buyer.”

An associate licensee acts only on the broker’s behalf and has no relationship with clients independent of the broker.

A broker is still not liable for the tortious acts of his or her associate licensee. The additional fiduciary duty in Horiike is limited to disclosure.

Although Horiike is a landmark dual agency case, it is limited in its scope. The court even states, “The fiduciary duty of disclosure that Horiike alleges Cortazzo breached is, in fact, strikingly similar to the nonfiduciary duty of disclosure that Cortazzo would have owed Horiike in any event.”

Disclaimer – The content in this Government Affairs section is intended as a general advisory, and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.

Patrick Norman McVay was born in Pennsylvania on June 16, 1937, to Anthony James McVay and Marie Clare McVay. After moving to Southern California, Pat earned his real estate license in 1960.

By 1969, Pat McVay and Jim Brady were partners in running Brady Realty, a company that served the Huntington Beach and Fountain Valley areas. When Jim passed away suddenly of a heart attack, Pat became sole owner of the business and, eventually, changed its name to Real Estate by McVay.

Pat’s close friend, Gordon Livingston of Livingston Realty, who first met Pat in 1965, describes him as “the most giving person I ever knew in real estate.” Pat was not only successful himself but also willing to share what he believed were the secrets of his success with others. “He made hundreds of agents successful by training them and guiding them,” says Livingston.

A natural mentor, Pat knew intuitively the value that motivation could play in creating success. “He invited great guests to the office, including Zig Ziglar, Tommy Hopkins, and Earl Nightingale,” says Livingston. “A number of agents owe their success to Pat McVay.” In fact, real estate coach Mike Ferry worked as a sales agent for Pat in 1970.

Pat was well respected among his colleagues in the real estate industry, who—in 1976—elected him president of the Huntington Beach/Fountain Valley Board of REALTORS®, a predecessor organization of the Orange County REALTORS®.

From 2014 until his passing on November 23, 2016, in Huntington Beach, California, Pat McVay worked as a REALTOR® for Star Real Estate in the same building that once housed Real Estate by McVay. Frank McDowell, chief executive officer of AMC Inc., the parent company of Star Real Estate, says, “Pat was known to be a great motivational speaker. Everyone loved his ideas.”